20180119-法国巴黎银行-Hungary__HUF_way_through_9页_302kb

Summary of EM Strategy Desknote: Hungary HUF Way Through

Core Content

This document provides an analysis of the Hungarian currency and interest rate market dynamics, focusing on the National Bank of Hungary's (NBH) strategy to manage the HUF's value and interest rate curve through unconventional monetary policy tools, particularly interest rate swaps (IRS) tenders.

Key Market Developments

• The NBH conducted its first IRS tender of 2018, offering a smaller-than-expected amount of 5-year and 1-year swaps, which led to a spike in longer-dated bond and swap rates.
• The reaction was part of a broader context where EUR front-end rates had rebounded due to hawkish ECB comments and a repricing of 1y1y EONIA.
• The NBH's strategy is to control EURHUF forwards by managing the interest rate curve, especially in the belly and long end, to prevent over-tightening through HUF appreciation.

Hungary's Macroeconomic Vulnerability

• The main source of macroeconomic vulnerability is the large negative international investment position (IIP), currently at around 65% of GDP, accumulated from current account deficits.
• The NBH aims to reduce this IIP by allowing the HUF to depreciate and running a current account surplus.
• The NBH has been reducing local interest rates, particularly in the front end, to support this strategy.

Strategy and Market Reaction

• Receive 5y HUF swap: The NBH's recent actions have allowed for a more controlled market reaction, preventing a large drawdown as seen in previous sell-offs. The 5-year swap rate saw a significant jump, but the NBH's new tools help mitigate this risk.
• Short HUF versus EUR: The NBH is more willing to let EURHUF rise towards the 320 level, as it does not seem to mind the EURHUF appreciation. The strategy is to be short HUF, anticipating limited further steepening of the EUR curve due to the significant short EUR positions held by European investors.

Context of ECB Policy

• The ECB's quantitative easing program indirectly affects the EURHUF rate by preventing rapid EUR appreciation, which could negatively impact eurozone inflation.
• The NBH's actions are influenced by ECB policy, as it seeks to maintain the stability of the HUF in the context of a broader European monetary strategy.

Tools and Instruments

• The NBH uses forward rate agreements and IRS swaps to control the curve's steepness and manage outflows.
• These instruments are used to provide cheap funding in the longer end of the curve and prevent stop-losses on receiver positions.

Contacts and Legal Information

• Emerging Markets Strategy Contacts:

  • Wike Groenenberg (Head of Emerging Markets Research, CEEMEA & APAC)
  • Marcelo Carvalho (Head of Emerging Markets Research, Latam)
  • Piotr Chwiejczak and Sai Ulluri (FX & IR CEEMEA Strategists)
  • Erkin Isik, CFA (FX & IR CEEMEA Strategist)
  • Mirza Baig (Head of FX & IR Asia Strategy)
  • Others in the BNP Paribas network

• Legal Notice:

  • The document is non-independent research and a marketing communication.
  • It does not constitute investment research or advice.
  • BNPP may have conflicts of interest and may engage in transactions inconsistent with the views expressed.
  • Information is provided for informational purposes only and is not guaranteed to be accurate or complete.
  • All estimates and opinions are subject to change without notice.

• United States Disclosures:

  • Options and ETFs discussed may involve significant risks.
  • Some securities may not be registered under U.S. securities laws and are restricted.
  • The document is a general solicitation of derivatives business and not an offer to sell securities in the U.S.

Conclusion

The NBH's approach to managing the HUF is closely tied to the broader ECB strategy and its own financial conditions. By using IRS tenders, the NBH is better positioned to control market reactions and prevent excessive HUF appreciation. Investors are advised to consider specific strategies such as receiving 5y HUF swaps and being short HUF versus EUR, while being mindful of the legal and risk-related disclosures.